The Importance of Ethics in Branding: Mediating Effects of Ethical Branding On Company Reputation and Brand Loyalty

The Importance of Ethics in Branding:
Mediating Effects of Ethical Branding on

Company Reputation and Brand Loyalty
Sharifah Faridah Syed Alwi
Brunel University London
Sulaiman Muhammad Ali

University of Syiah Kuala
Bang Nguyen
East China University of Science and Technology
ABSTRACT: This study aims to develop an ethical branding framework that deter-
mines whether a corporate brand’s functional and emotional values, that is, product,
service quality, and perceived price (antecedents), influence ethical branding and,
consequently, company reputation and brand loyalty (consequences) among industrial
buyers of electronic office equipment in Malaysia. Using structural equation modelling,
the article demonstrates the effects of perceived price, quality of product and service on
ethical branding, company reputation, and brand loyalty. The results reveal that prod-
uct quality directly influences ethical brand perceptions and, consequently, company
reputation. Perceived price and service quality do not directly affect company reputa-
tion; instead, they affect its identification through ethical branding. The findings thus
demonstrate that product quality, perceived price, and service quality affect company
reputation through the mediation of ethical branding. This highlights that an ethical
brand is effective for companies to maintain their reputation among industrial buyers.
KEY WORDS: ethical branding, ethical corporate marketing, corporate brand,

corporate reputation, electronic office equipment
INTRODUCTION
W ith the complexity of the modern business world, developing a corporate brand
continues to be a major challenge (Melewar & Nguyen, 2015). Companies
today are expected to deliver more value as well as behave responsibly and ethically
toward their stakeholders (Martin & Johnson, 2010; Olins, 2014). Both con-
sumers and investors are increasingly aware of socially irresponsible behavior
by some companies (Mulki & Jaramillo, 2011), which constitutes an emerging
issue that must be addressed (Balmer, Powell, & Greyser, 2011). In response to
these developments, several scholars (Balmer et al., 2011; Okoye, 2009; Powell,
2011; van de Ven, 2008) have proposed that organizations must balance their
©2017 Business Ethics Quarterly 27:3 (July 2017). ISSN 1052-150X pp. 393–422
DOI: 10.1017/beq.2017.20
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394 Business Ethics Quarterly
relationship between making money and doing the right thing via an “ethical
brand identity.”
The ethical brand identity is a concept in which the corporation is a citizen of a
society with rights and responsibilities (Andriof & McIntosh, 2001; Okoye, 2009).
It is an approach to positioning and differentiating a brand that starts from the root
of the company and is heavily influenced by ethical principles and the concept of
corporate social responsibility (CSR) (Biraghi & Gambetti, 2015), which has been
variously described as “corporate self-regulation integrated into a business model”
(e.g., Lin, Lyau, Tsai, Chen, & Chiu, 2010: 357). The key notion of ethical brand
identity is that managers must comprehend that branding should be addressed from
the root or essence of the organization (i.e., getting it right from the beginning),
starting with its values, mission, and vision, which, in turn, shape its corporate
strategy (Balmer et al., 2011; Biraghi & Gambetti, 2015; Hur, Kim, & Woo, 2014;
McWilliams & Siegel, 2001; Olins, 2014; Okoye, 2009; Powell, 2011; Urde,
Baumgarth, & Merrilees, 2013; Votaw, 1972). Hence, it can be appropriate to
define the ethical brand identity using both ethical principles and CSR values and
dimensions (e.g., economic, environment, and social responsibility) (Fan, 2005;
van de Ven, 2008).1 Once an ethical brand identity is established, it will help to
remind the organization of its essence and stance, its promises and agreements
and, thus, subsequent marketing activities will be created according to these val-
ues. Therefore, ensuring an ethical focus from the beginning with the roots driven
into CSR-influenced values is important to every organization. By incorporating
an ethical philosophy through CSR elements in its strategic corporate marketing
approach, such as when designing mission and vision, an organization can enhance
its identity (Balmer et al., 2011). This CSR approach thus fuels the ethical brand
identity concept in the way that a firm can use CSR elements to shape its identity
and place importance on an identity-driven approach in which the identity is
formed from the inside out (Balmer, 2013; Urde, 2009; Urde et al., 2013). Thus,
the “CSR-identity” approach serves as the starting point of an organization’s
positioning concerning what it stands for, and thereby defines the essence of the
corporation (Urde et al., 2013). This marks a new approach to projecting a corpo-
rate identity (Singh, Iglesias, & Batista-Foguet, 2012; van Rekom, Go, & Calter,
2014) and how an organization can potentially sustain its brand for a long-term
competitive advantage (Carroll & Buchholtz, 2014; Mulki & Jaramillo, 2011).
This kind of conceptual and empirical understanding of how a company can
utilize corporate marketing/branding and CSR, as well as be considered an ethical
brand, and the company’s relationship with marketing strategy or corporate marketing
outcomes (such as corporate reputation, brand loyalty, and brand equity), however,
is still rare (Balmer et al., 2011; Brunk, 2010a; Hur et al., 2014; Mulki & Jaramillo,
2011; Powell, 2011; Singh et al., 2012). The theoretical gaps comprise four different
points. First, although CSR is not new in the business ethics literature and is widely
researched, its empirical relationship in shaping corporate brand identity and linkage
to marketing strategy is still uncommon (Hur et al., 2014; Loe, Ferrell, & Mansfield,
2000; Mulki & Jaramillo, 2011). Second, most CSR research centers on the topic of
its effectiveness and its outcome rather than its empirical relationship with (corporate)
The Importance of Ethics in Branding 395
marketing outcomes (e.g., brand equity, consumer attitudes, and consumer loyalty)
(Brunk, 2012; Hur et al., 2014). Third, a new stream of research has emerged that
links CSR to marketing outcomes; however, this research predominantly examines
the product level (e.g., Brunk, 2010a; 2011; Singh et al., 2012) with the exception
of Hur et al. (2014), whose research focuses on the corporate brand level. As argued,
addressing CSR at the product level cannot address a company’s ethical stance
through its corporate philosophy and identity, and thus, countless stakeholders, who
must be the focus when communicating CSR, cannot be reached. Finally, most of the
research focused on the relationship between CSR and brand equity targets consum-
ers (rather than the industrial buyer) (Brunk, 2010b; Palazzo & Basu, 2007; van de
Ven, 2008), with the exception of Chi-Shiun, Chih-Jen, Chin-Fang, and Da-Chang
(2010). Hence, the effect of CSR on corporate branding outcomes among industrial
buyers is underemphasized since previous research concerning the purchase decision
making of organizations primarily focuses on the individual factors of employees
or organizational factors (Loe et al., 2000; van de Ven, 2008).
To fill the above gaps, this study investigates what makes a company’s identity visible
as an “ethical brand” through positioning its identity in a more strategic manner.
While previous studies provide useful reasons for why marketing strategies should
explicitly incorporate CSR dimensions to ensure that the company is considered an
ethical brand, as well as why CSR should be the main focus of the company’s brand
positioning, how this is to be achieved (guidelines) is not discussed as the previous
works are largely conceptual (van de Ven, 2008) and at the rhetoric level (Parguel,
Benoit-Moreau, & Larceneux, 2011). These perspectives limit the understanding
of how a company can enhance its position as an ethical brand and whether this
condition then influences its company reputation, and, consequently, brand loyalty.
Additionally, understanding how customers form the concept of an ethical brand
allows deeper insights into their responses to corporate ethics, CSR, or corporate
reputation (Brunk, 2010b).
We therefore approach this question by extending these conceptual papers through
an empirical validation of how a company can enhance its identity through ethical
branding (incorporating the CSR elements) with a different stakeholder approach:
business buyers. In particular, the earlier research lacks empirical guidance regarding
1) how one should define and measure ethical branding at the corporate level;
2) what makes a company visible as ethical; and 3) its impact among business buyers
on corporate marketing outcomes, such as company reputation and brand loyalty.
The study combines several business domains to express its originality, that is, by
incorporating CSR from the business ethics literature into the corporate brand and the
corporate marketing domain. In particular, we empirically investigate how an ethical
brand is formed, how to operationalize and measure the concept, and its relationship
(as a mediator construct) with corporate marketing outcomes (corporate or company
reputation and brand loyalty) among business buyers. Studying industrial buyers
of electronic products (the focus of this study) is particularly important in that the
increasing awareness of environmental issues has stimulated concern about the dis-
posal of products containing hazardous waste and the associated deleterious effects
on the quality of the environment (Nnorom & Osibanjo, 2008). These ethical issues
affect every type of business, enterprise, organization, and person (Sharp, 2003),
thus making our research into the ethical brand concept both timely and crucial.
The remainder of the paper is organized as follows. First, we elaborate on the research
background in relation to the marketing and brand ethics literature, and develop a series
of hypotheses. Subsequently, we present our method in detail, followed by our study
results. We then discuss our findings and contributions. Finally, we consider the study’s
implications for management and offer suggestions for future research.
LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT

Ethical Branding Defined
We approach our ethical branding definition by examining the literature pertaining
to two domains: 1) business ethics and CSR, and 2) marketing ethics (in particular,
societal marketing, ethical corporate marketing, and branding). Ethics in marketing
and branding is a difficult concept to define, as, to date, how best to conceptualize,
operationalize, and measure ethics has been a challenge (Brunk, 2012; Fan, 2005;
Maignan, Ferrell, & Ferrell, 2005; Singh et al., 2012). Our definition of an ethical
brand is guided by the following three bases: 1) ethics in marketing and branding
(through CSR dimensions); 2) the chosen stakeholders – industrial buyers; and
3) the context under study – electrical and electronic products.
A firm’s corporate image is vital for businesses to elicit a stronger positive
emotional response from its stakeholders/society, and to help enhance its business
performance, corporate brand equity (Hur et al., 2014; Stanaland, Lwin, & Murphy,
2011), and corporate sustainability (Carroll, 2000; Powell, 2011). Incorporating
CSR elements at the early stages of designing a company’s corporate strategy not
only contributes to how the mission and vision of the company could be written
around this philosophy but also encourages companies to exert effort to achieve a
positive image and reputation built around sincerity, integrity, and honesty (Balmer
et al., 2011; Hur et al., 2014; van de Ven, 2008). Additionally, since the corporate
marketing era, ethics and CSR have been emphasized in shaping the philosophy,
as provided in the following definition:
Corporate marketing is a customer, stakeholder, societal and CSR focused philosophy

enacted via an organization-wide orientation and culture. A corporate marketing rationale
complements the goods and services logic. It is informed by identity-based views of the
firm: this is a perspective which accords importance to corporate identities and corporate
brands. The latter provide distinctive platforms from which multi-lateral, organizational
and stakeholder/societal relationship are fostered to all-round advantage. The corporate
marketing orientations are also mindful of its corporate responsibilities in societal, ethical,
and CSR terms (Balmer, 2011: 1350).
The marketing domain, having begun with a production and selling orientation,
later progressed to a marketing, brand, and societal orientation in which consumers
constitute the focal point. Firms address not only consumers but also other stakehold-
ers by building corporate brand identity, corporate image, and corporate reputation.
In addition, addressing these issues to multiple stakeholders has become more
important, which product values alone cannot address. These elements – corporate
identity, corporate image, corporate brand, corporate communication, and corporate
reputation – are the main mix of corporate marketing, and addressing the higher or
corporate level extends the elements of the previous orientation of marketing (the
marketing mix/4Ps), which pertain only to the product level (Balmer & Greyser, 2006).
Corporate brand thus represents the total brand promise of the company, includes
both product and company values, and represents not only the values from within the
company (philosophy, culture, identity) but also what it communicates externally to its
stakeholders (image and reputation) (Balmer, 2011). Thus, in line with earlier studies
(Balmer, 1995; Balmer, 2001; Balmer, 2013; Beren, van Riel, & van Bruggen, 2005;
Biraghi & Gambetti, 2015; Olins, 2014; Powell, 2011; Urde et al., 2013; Urde, 2003;
Urde, 2009; van de Ven, 2008; Xie & Boggs, 2006), this study adopts the corporate
marketing approach in developing a conceptual model and testing it empirically.
Hence, to manage the complexity of addressing other stakeholders, such as
at the industrial level, seeing that a corporation behaves morally and undertakes
its social responsibility encourages stakeholders to enhance a firm’s positive image
and reputation among its suppliers (Brunk, 2010a; Palazzo & Basu, 2007), as well
as the commitment to the corporation (Balmer, 2013; Davies, Chun, da Silva, &
Roper, 2004; Olins, 2014; van de Ven, 2008).
Additionally, the core element of a corporate brand, which is shaped through corpo-
rate identity, includes products, services, its citizenship program, and its corporate
social responsibility program (Abratt & Kleyn, 2012). In addition, corporate brand
is formed through what Brown and Dacin (1997) and Dacin and Brown (2002)
refer to as corporate associations. These associations include the company’s prod-
ucts and services, which represent an important characteristic when relating to the
consequences or marketing outcomes, such as product responses (e.g., product
perceptions or evaluations, purchase intentions, purchase behaviors) and responses
to the company (e.g., trust and commitment) (Brown, 1998).
From a stakeholder’s perspective, ethical branding is about delivering the
company’s responsibility and its moral obligation to them/society (Maignan et al.,
2005). Maignan et al. (2005) explain that practitioners and marketers struggle
with the notion of corporate social responsibilities and the meaning of the word
society as it is a very abstract concept that is more ambiguous than a corporation
(Clarkson, 1995). Hence, researchers must be more specific regarding which
stakeholders corporations currently interact with, and then define corporations’
ethical branding based on the moral responsibilities the companies have toward
their stakeholders (Maignan et al., 2005). Therefore, the organization’s CSR efforts
are issue-specific, and the organization could focus on improving its exemplary
behavior with respect to one context and/or stakeholder (Maignan et al., 2005).
Additionally, organizations employ several means to form the core values or philoso-
phy behind the corporate ethical branding, such as values derived from: 1) the organiza-
tion; 2) the product/service brand; and 3) added value experienced by customers (Urde,
2003), particularly among industrial buyers (Beverland, Napoli, & Yakimova, 2007).
Balmer et al. (2011) explain that ethical identity from a corporate marketing per-
spective should have explicit CSR dimensions that address such moral obligations.
In particular, these moral obligations include such attributes as “honesty, integrity,

diversity, quality, respect, responsibility, and accountability” (Fan, 2005: 347), and not
harming the public good. Instead, corporations should contribute to or help promote
public good (Fan, 2005). In a similar vein, Singh et al. (2012) define ethical brand as
the perception of a brand that reflects honesty, responsibility, and accountability toward
various stakeholders. Bhattacharya and Sen (2004: 13), citing the global nonprofit
BSR, add that the main objective of CSR is to achieve business success through means
that “embody ethical values and respect people, communities, and the natural envi-
ronment.” Several scholars in marketing and branding (Brunk, 2010a; 2012; Enderle
& Tavis, 1998; Hur et al., 2014; Singh et al., 2012) propose that a firm could address
its responsibility through economic, social, and environmental dimensions to achieve
corporate sustainability. For example, economic responsibility refers to activities that
are intended to maximize the company’s profit and economic impact, (maximization
of share value), while simultaneously improving employees’ morale/productivity
and respecting suppliers (Enderle & Tavis, 1998; Schwartz & Carroll, 2003). Hence,
addressing CSR at the corporate marketing level enhances its integrity, which under-
pins the ethical brand concept (Powell, 2011). Thus, in this study, ethical branding:
• is conceptualized as the sum of core values of the corporate brand (an emo-
tional concept) (Singh et al., 2012; Urde, 2003; van de Ven, 2008);
• is derived from three levels: organizational, product, and/or service/added
value (Abratt & Kleyn, 2012; Balmer et al., 2011; Balmer, 2013; Beverland
et al., 2007; Brown & Dacin, 1997; Brunk, 2010a; Dacin & Brown, 2002;
Urde, 2003; Urde, 2009; Urde et al., 2013; van de Ven, 2008);
• has moral obligations (through economic, environmental, and social
responsibility) (Enderle & Tavis, 1998; Balmer et al., 2011; Brunk, 2010a;
Hur et al., 2014; Singh et al., 2012; van de Ven, 2008);
• interacts with specific stakeholders/society (Maignan et al., 2005), e.g.,
the industrial buyer (the focus of this study) operating in an area such
as electronics carrying a greater degree of environmental responsibility
through pollution, recycling, and product safety, etc.
Here, the brand is not treated simply as brand elements (e.g., logo, character,
symbol, color, design, or slogan) or functional values (de Chernatony, 2002) targeted
at the customers, but also as brand values (that encompass functional, emotional,
and societal values) representing both product/services and company/corporation
(Balmer et al., 2011; Brunk, 2010a; Fan, 2005; Urde, 2003; van de Ven, 2008).
In other words, the term brand also refers to the company/organization (i.e.,
the corporate brand), and by being an ethical brand, the brand: (1) acts morally;
(2) considers economic, social, and environmental responsibilities; (3) has integrity,
honesty, accountability, and commitment to doing the right thing; and (4) creates
added value for the firm, customers, and its stakeholders. Adopting this behavior will
be seen as doing the right thing and gaining integrity, honesty, and accountability,
which, in turn, could enhance a company’s reputation and brand loyalty (Fan, 2005).
Theoretical Underpinning: Antecedents and Consequences of Ethical Branding

The theoretical underpinnings of the antecedents and consequences of ethical
branding are developed from the perspectives of corporate marketing (Balmer
et al., 2011; Beverland et al., 2007), branding (de Chernatony, 2002; Urde, 2003;
van de Ven, 2008), and stakeholder perceptions (Clarkson, 1995; Maignan et al.,
2005). Since ethical branding is defined as part of the corporate brand’s sum of
values which derive from the organization’s philosophy, its members, its product
or services, and added value (Beverland et al., 2007; de Chernatony, 2002; Urde,
2003), these values can be categorized as functional and emotional. Functional val-
ues are represented by the product, service quality, and price, while the emotional
or affective values of the organization are represented by ethical branding (Brunk,
2010a; van de Ven, 2008). According to de Chernatony (2002), buyers take into
account the corporate brand’s functional consideration first, and then the emotional
consideration. In other words, ethical branding is an affective outcome that results
from the industrial buyer’s experience of the functional values. This notion is used
to underpin our conceptual model.
As long as the supplier conveys its responsibility, a customer may develop a pos-
itive evaluation (affect) and view the company as an ethical brand. The experience
offered by the company may be that of providing added value through innovative,
quality products and services, and being seen as a good corporate citizen, which
subsequently improves its corporate reputation (Hur et al., 2014; Mulki & Jaramillo,
2011; Schwartz & Carroll, 2003; Singh et al., 2012). Price, considered another
important functional aspect, is seen as helping to convince the buyer that the company
produces a high-quality product, thereby encouraging the industrial buyer to spend
more (Story & Hess, 2010). Hence, in our study, perceived price, product quality,
and service quality (functional aspects) are considered the important antecedents of
the ethical brand (an affective aspect), which, in turn, lead to favorable outcomes,
such as improved reputation and brand loyalty. These relationships form a company’s
competitive advantage. In the next section, we discuss these variables in more detail
and develop the research model and corresponding hypotheses.
Direct Effects Hypothesis

The hypothesis development for the current study has two parts: (a) direct
effects, and (b) indirect or mediator effects. We discuss direct effects before
developing mediation predictions in the subsequent section. The consequences
of the ethical brand are company reputation and industrial brand loyalty (Hur et al.,
2014; Mulki & Jaramillo, 2011). Examples of the functional values are product
quality, service quality, and perceived price, which we consider to have important
relationships with company reputation and brand loyalty. Consistently, the tan-
gible attributes, including product, service quality, and cost/price, are important
antecedents of customer perceived value (Cretu & Brodie, 2007) and the ethical
brand (Parguel et al., 2011).
Because customer value is also a form of ethical branding (Singh et al., 2012;
Urde, 2003), the inclusion of product and service quality is justified due to their
value-added capabilities (Paluszek, 2005). The quality of a product includes

its capability to perform to the customers’ needs and expectations (Crosby,
DeVito, & Pearson, 2003). Product quality aims to fulfill the minimum require-
ment specifications that are consistent with the customers’ needs, such as product
safety and health standards (Nnorom & Osibanjo, 2008), and the environment
(Whysall, 2000). Additionally, through an ethically oriented brand’s services and
products, the societal needs are met (Biraghi & Gambetti, 2015), and the product
and service qualities that conform to ethical standards differentiate themselves
on the basis of an environmental or social quality (Parguel et al., 2011). To be ethi-
cal, a company must incorporate ethics into all aspects of its business practices,
including the product development processes. Within high-quality products, buyers
may select a brand that is deemed to deliver ethical values and behave responsibly
(Wartick, 2002).
With respect to service quality, companies that deliver superior service quality
will be highly valued by their partners (Paluzsek, 2005). Story and Hess (2010)
highlight that service quality results in good customer relationships and profitability.
From a relational exchange perspective, relationship benefits include security,
consistency, and overall improved service quality (Payne & Frow, 2013). For
example, after-sales service is particularly important for electronic products
(e.g., electronic office equipment, such as computer servers, notebooks, desktops,
printers, and photocopiers). If a brand provides a better quality of service than
its competitors, it may be perceived that the brand is credible and reliable, which
are aspects of ethical value.
Finally, in this study, the perceived price refers to the price being charged
to the buyer to cover the costs relating to enhancing the quality of the product
and service. Lowengart, Mizrahi, and Yosef (2003) explain that reasonable or
premium pricing relates to the quality offered by the brand. This is because
the quality enhancement efforts (such as training of workers, new technology
and equipment, cost of recruitment of new labor, and maintenance cost of new
equipment) increase the average price of production (Story & Hess, 2010). There-
fore, a brand offering a high-quality product or service may charge a higher price
(Story & Hess, 2010).
Buyers also judge the brand through its ethical responsibility (e.g., economic,
social, and environmental) (Balmer et al., 2011; Story & Hess, 2010; van de Ven,
2008). For example, if manufacturers use high-quality products, they will enjoy
a strong brand name (economic responsibility). In addition, as the current study
focuses on electrical and electronic products, a manufacturer might also fulfill its
moral responsibility concerning disposal of hazardous waste deriving from elec-
trical and electronic assemblies containing chemical elements (Ernst & Young LLP,
2014). Reducing the negative effect of this waste on the environment requires a
comprehensive program for recycling, recovery, and disposal (Nnorom & Osibanjo,
2008), for which investment is needed. This of course affects the average cost of
production, and, consequently, increases the price. Hence, a higher price may affect
the buyer’s perception that the company offers an ethical brand in relation to
its environmental, social, and economic responsibilities, and affect brand loyalty
(Story & Hess, 2010). Consequently, there is a correlation between price perception
and ethical branding. The following hypotheses are tested:
H1a: Product quality will have a direct positive effect on ethical branding.
H1b: Service quality will have a direct positive effect on ethical branding.
H1c: Perceived price will have a direct positive effect on ethical branding.
Company reputation is defined as “a particular type of feedback, received by
an organization from its stakeholders, concerning the credibility of the organization’s
identity claims” (Whetten & Mackey, 2002: 401). Company reputation is enhanced
when customers feel secure about purchasing the company’s products and services;
thus, positive product or service performance brings many benefits to a company,
while poor performance produces negative reactions (Cretu & Brodie, 2007). Cretu
and Brodie (2007) conceptualize credibility as the link between company behavior
and public confidence. Thus, the better the product quality, the higher the perceived
ethical branding value; consequently, when higher value is apparent (Wartick, 2002),
the ethical brand is recognized as enhancing the company reputation (Fan, 2005).
Additionally, in terms of social responsibility, a company that respects laws and
regulations, prevents discrimination, and respects social customs and cultural heri-
tage (Brunk, 2010a; Enderle & Tavis, 1998), may enhance its reputation as a good
corporate citizen (Cretu & Brodie, 2007). Moreover, Mazzanti and Zoboli (2006)
explain that a responsible waste and recycling policy influences innovation, espe-
cially when manufacturing industries are involved. A company that has a recycling
program may be perceived as being environmentally responsible and innovation
oriented, thus enhancing its reputation (Cretu & Brodie, 2007). Furthermore,
the overall level of service offered by an organization is indicated by the customer’s
assessment of its service quality (Farrell, Souchon, & Durden, 2001). This, in turn,
is related to the responsible behavior of the company to its buyers, that is, offering
excellent service quality, which is itself related to ethical branding (Brunk, 2010a).
Cretu and Brodie (2007) ascertain that market responses concerning how
the company image and reputation are perceived (e.g., good or bad image) are
influenced not only by product, service or branding attributes, but also by price.
As customers may perceive that a strong brand can enhance the trust or reduce the
risk (Balmer & Gray, 2003), especially for high-technology products (e.g., computer
servers, notebook computers, electronic whiteboards, and similar products), a higher
price will enhance the credibility of the company (Ambler, Kokkinaki, Puntoni, &
Riley, 2001). We thus hypothesize:
H2a: Product quality will have a direct positive effect on company reputation.
H2b: Service quality will have a direct positive effect on company reputation.
H2c: Perceived price will have a direct positive effect on company reputation.
Brand loyalty refers to the commitment of buyers to sustain a long-term rela-
tionship with the brand manufacturer (Lam, Shankar, Erramili, & Murthy, 2004).
According to Lam et al. (2004), using a sensitivity analysis, the perception of
price changes the level of influence of loyalty, sensitivity to quality, and the level
of competition in a given industry. Buyers are ready to pay a higher price for a
good quality product/brand with high-engineering design that offers superior

value compared to its competitors (Cretu & Brodie, 2007). Given high quality, indus-
trial buyers are willing to pay a premium price, intend or continue to use the brand,
and will recommend it to their business counterparts (van Riel, Mortanges, &
Streukens, 2005). Therefore, maintaining product and service quality is crucial
to maintaining brand equity and a relationship with industrial buyers (Bendixen,
Bukasa, & Abratt, 2004). In addition, Jayawardhena, Souchon, Farrell, and Glanville
(2007) conclude that service quality has important managerial implications for
customer loyalty. Thus, the higher the perception of the overall service quality,
the more customers will engage with the brand as an expression of brand loyalty in
the business-to-business context (Bendapudi & Leone, 2002). Additionally, Story
and Hess (2010), and Stanaland et al. (2011) show that industrial customers are
willing to pay a premium price for brands that exhibit strong brand equity, with
the buyer choosing products/services from famous brands. Thus, industrial buyers
also consider higher price to be an indicator of ethical branding in their purchasing
decisions (Wood, 2000). Therefore, having a strong, differentiated brand will help
maintain and sustain the relationships with its customers, thereby earning buyers’
loyalty in a highly competitive market (Lynch & Chernatony, 2004). Thus,
H3a: Product quality will have a direct positive effect on brand loyalty.
H3b: Service quality will have a direct positive effect on brand loyalty.
H3c: Perceived price will have a direct positive effect on brand loyalty.
Mediation Hypotheses
Product quality is the overall excellence or superiority of a product, which can
be described according to its performance, features, reliability, conformance,
durability, and aesthetics (Crosby et al., 2003). Service quality refers to the ability
to advise customers on technical and commercial enquiries (Beverland et al., 2007).
In the electronic office equipment industry, the quality of the product and service
can enhance the confidence of customers in their purchase decision making. With
enhanced confidence, risk is reduced, and the company’s reputation and brand
loyalty are increased (van Riel et al., 2005). As argued previously, one of the
main research gaps is our understanding of the effect of CSR brand on marketing
outcomes (such as brand equity, corporate credibility, and corporate reputation)
(Hur et al., 2014). However, the credibility of and the trust in the corporate brand
depend on how well a company is able to use and communicate its CSR marketing
strategies to its various stakeholders, which, in turn, may enhance both the corporate
brand’s reputation and the brand equity (Hur et al., 2014).
We posit that an ethical brand invokes strong emotions that, ultimately, lead to
favorable outcomes, such as improved company reputation and increased brand loy-
alty. An ethically conscious brand creates superior value as an emotional component
that may affect company reputation and brand loyalty (Brunk, 2012). Additionally,
with the creation of value, the emotional aspect expressed in the ethical brand may
also affect the responses of industrial buyers, namely company reputation and brand
loyalty. Thus, we posit that the benefits of product and service quality, and perceived
price, determine the overall perceptions of the ethical brand (core value added),
which influence the responses of industrial buyers, particularly their perception of
the company’s reputation and subsequent brand loyalty. In addition, business buy-
ers are willing to pay a higher price for brands provided by companies with a high
reputation due to the higher price of a brand being equivalent to quality (Lowengart
et al., 2003). A company producing high-quality products and services has a strong
brand, which enables it to charge a premium price (Lynch & Chernatony, 2004) as
customers may perceive that a strong brand enhances the trust or reduces the risk,
especially for high-technology products that may suffer certain set identities due to
their association with a specific industry (as highlighted by Melewar & Karaosmanoglu,
2006). Reputation is thus a key factor for achieving success and competitiveness
(Cretu & Brodie, 2007). Based on the above discussion, we investigate the effects
of product quality, service quality, and perceived price through ethical branding on
company reputation and brand loyalty, as hypothesized below:
H4a: Ethical branding mediates the effect of product quality on company
reputation.
H4b: Ethical branding mediates the effect of service quality on company
reputation.
H4c: Ethical branding mediates the effect of perceived price on company
reputation.
H5a: Ethical branding mediates the effect of product quality on brand loyalty.
H5b: Ethical branding mediates the effect of service quality on brand loyalty.
H5c: Ethical branding mediates the effect of perceived price on brand loyalty.
Olins (2004: 228) noted that the crucial issue companies face is that consumers
who do not like the way a company behaves are likely to go elsewhere. Many
pressure groups will punish companies based on the way they behave publicly, and
good behavior will be rewarded with higher profits (Olins, 2014). Although being
seen as ethical may not necessarily have an immediate effect (it is not guaranteed
that consumers will buy the product, even after the spending activities of the com-
pany), most scholars agree that incorporating ethical marketing (Balmer et al.,
2011) (or being seen to be an ethical brand; Fan, 2005) helps long-term business
performance by enhancing company reputation; increasing sales, profit, and market
shares (van de Ven, 2008); and improving the company’s strategic competitive
advantage (Martin & Johnson, 2010). Fombrun, Gardberg, and Barnett (2000)
note that corporate reputation (built through responsible behavior) may explain
buyers’ decisions and commitment to a company’s products. Indeed, van Rekom
et al. (2014) explain that to be successful in today’s environment, a company must
enhance the level of perceived authenticity of its brand through genuine societal
engagement, which improves firm reputation and ethical branding. This marks a
new way for brands to potentially become sustainable (Balmer et al., 2011).
Engaging in CSR is no longer window dressing or lip service (Balmer et al.,
2011), but a vital corporate activity to the extent that companies are under
pressure to behave (or be seen to behave) in a manner that benefits society and
is acceptable to the public (van de Ven, 2008). Therefore, managing reputation is

essential for a company to maintain long-term buyer commitment and achieve
sustainability (Balmer et al., 2011). In other words, an ethical brand that acts
responsibly is instrumental to business success to express a company’s reputation,
and the long-term success of the company depends on its integrity, and tradition
of honesty and fair dealing as its ethical responsibility toward its stakeholders.
Reputation is vital in the business-to-business market, and, hence, a key factor for
competitive success (Cretu & Brodie, 2007). By incorporating CSR or other ethical
aspects into its strategic corporate marketing, a company can enhance buyers’ loyalty
and commitment (Balmer et al., 2011). Through this strategic approach, the brand
is able to build confidence among various stakeholders regarding their relationship
with the company. Accordingly, we propose the following hypothesis:
H6: Company reputation mediates the effect of ethical branding on
brand loyalty.
The model in Figure 1 illustrates the above hypothesized relationships.
METHODOLOGY
Research Context, Sampling and Data Collection

We test our model with a sample of industrial buyers of electronic office equipment in
Malaysia. This context is of interest for several reasons. First, CSR activity in Malaysia
is increasing and has gained national interest. Malaysia established companies (from
the private sector – small to large multinational corporations) to assist and accelerate the
Government Transformation Programs (GTP) as part of a New Economic Model (NEM)
at the beginning of 2010 to achieve a sustainable society (National Economic Advisory
Council, 2010). It is the government’s aspiration to create a united country with strong
moral values and a caring and economically just society (UNICEF Malaysia, 2009).
Therefore, because the acceptance of CSR is an emerging notion within the region, this
research is timely, especially to guide businesses that wish to operate within this market.
Figure 1: Proposed Conceptual Model
Second, most of the empirical research has been conducted in the Western context (van
de Ven, 2008), and our understanding of the empirical relationship between CSR and
corporate branding in Asian markets remains limited (Chi-Shiun et al., 2010; Nguyen,
Melewar, & Schultz, 2016). However, as the relative importance of branding varies as
much across national boundaries as it does across institutions, branding should be
considered geographically (Balmer & Liao, 2007). Furthermore, emerging markets offer
growth potential for firms in more advanced economies, and it is therefore important
to determine branding strategies that are preferred or acceptable to these markets
(Xie & Bogg, 2006). Third, the product and identity of the industry type selected in our
study—electronic equipment—is considered relevant and of concern to environ-
mentalists (Melewar & Karaosmanoglu, 2006). Finally, empirical research offering a
definition from the ethical brand perspective at the company or corporate level in the
business-to-business context remains an under-researched area (Chi-Shiun et al., 2010).
We focus on the ethical brand construct and its effects in the context of electronic office
equipment purchases. Our study population consists of companies that use electronic
office equipment in Peninsular Malaysia. We conducted both mail and online surveys.
We obtained the companies’ data, including their mailing and e-mail addresses, from
the Companies Commission of Malaysia (CCM) and the Malaysian Industrial Develop-
ment Authority (MIDA).2 The sampling frame is industrial buyers with the respondents
consisting of CEOs, general managers, or appointed representatives (at the managerial
level) with sufficient experience in buying decisions, such as those who are directly
responsible for buying electronic office equipment for their companies. Another crite-
rion of the selection is that their companies must be legally registered with the CCM.3
Prior to the distribution of the questionnaires, the respondents were screened and
selected and those who did not match the above criteria were omitted. The study’s
approach is compatible with that used by Cretu and Brodie (2007) and van Riel
et al. (2005). In total, we distributed 1,356 questionnaires through the Internet and
mail across twelve districts in Peninsular Malaysia. There were 291 returns (21.4%
response rate). Specifically, of the 291 questionnaires returned, 186 were completed
via mail, and the remaining 105 questionnaires were completed online. The final
total usable sample was 272, as 19 were removed due to inadequate responses.
We thus achieved a response rate of 20%, which is comparable to the response rates
of previous studies.4 Among the respondents, the majority was male (63.2%), aged
between 30 and 44 (86.8%), with an average working experience of 11 to 15 years,
(63.2%) and having at least an undergraduate/bachelor level of education (67.3%).
These respondents included CEOs (4.4%), general managers (25.7%), production
managers (15.4%), financial managers (35.7%), and marketing managers (18.0%).
On average, their income level was RM 7,000.00–7,999.00 per month.5
Measures and Instrument Development

To generate measures for all six constructs, the existing literature served as our starting
point. Items were evaluated for the closest match to and suitability for our study’s
objectives with minimum adjustment to our context, namely, business buyers and
electronic office equipment. In total, 44 items were generated. Table 1 shows details
for each construct, including appropriate dimensions, sources, and individual items.
Table 1: Constructs, Items, and Confirmatory Factor Analysis Loadings
Construct/Source/Dimensions Item Loading

Product Quality Our company considers brand X because of its good 0.71
Crosby et al. (2003) performance
van Riel et al. (2005) Our company considers brand X due to its good features 0.72
The product specification of brand X matches our needs 0.76
Brand X can last for a long time (durable) 0.73
Our company considers brand X as high quality 0.71
Our company considers brand X to be innovative 0.77
*Our company buys brand X because products of -
brand X are aesthetically pleasing
Service Quality When staff of brand X promise to do something by 0.77
Jayawardhena et al. (2007) a certain time, they do so
van Riel et al. (2005) When our company has problems, staff of brand X 0.79
are sympathetic and reassuring
We buy brand X as employees of brand X are polite 0.75
Employees of brand X give us personal attention 0.77
Our company buys brand X because it provides 0.72
good online information
Our company buys brand X because it quickly 0.78
provides supplementary information
*Our company can trust employees of brand X -
*Our company buys brand X because it provides -
good information & documentation
Perceived Price Our company expects the overall prices of 0.74
Bolton et al. (2000) brand X to be high
Kukar-Kinney & Grewal (2006) The higher price of brand X reflects its quality 0.66
Lowengart et al. (2003)
The price of this brand is acceptable 0.75
* Brand X’s prices are likely to be higher than -
average market prices for the same products
*This brand has good price information for -
every type of product and situation
Ethical Branding
(3 dimensions)
Economic Responsibility Our company considers brand X contributes 0.76
Enderle & Tavis (1998) to profit maximization
The company of brand X always respects its 0.64
customers/supplier/us
Social Responsibility
Enderle & Tavis (1998) The company of brand X always respects the 0.72
laws and regulation of the country
Our company considers brand X organization’s 0.74
internal policy prevents discrimination
Our company considers brand X as it respects 0.80
social customs and cultural heritage
Table 1: continued
Construct/Source/Dimensions Item Loading

Environment Responsibility Our company uses brand X due to its recycling program 0.77
Enderle & Tavis (1998) Our company uses brand X due to its recovery 0.72
Nnorom & Osibanjo (2008) program (e.g., valuable material)
Our company uses brand X due to its disposal 0.78
program (e.g., final disposal)
Our company considers brand X preserve jobs and 0.76
engage in community work
Our company uses brand X due to its commitment 0.73
to sustainable development through consuming
less natural resources
*We consider using brand X because the -
company continually succeeds to increase
the wealth of stakeholders
*Our company uses brand X because the -
manager of the company monitors the
potential negative impacts on the community
Company Reputation Our company considers brand X’s company is 0.70
Cretu & Brodie (2007) being a good corporate citizen
Our company uses brand X because its customer focused 0.73
Our company considers brand X company as 0.73
innovation oriented
Our company considers brand X’s company as 0.56
product driven
*We consider buying brand X because it is well managed -
*Our company decides to buy brand x because -
it is a successful company
Brand Loyalty We care a great deal about the long term 0.78
Morgan & Hunt (1994) relationship with brand X
Davis (2003) The relationship our company has with brand X 0.70
van Riel et al. (2005) is something we are very committed to
If asked, we would recommend products of brand X 0.83
We intend to use products of brand X again in the future 0.76
*We use our maximum effort to maintain the -
relationship with brand X
*We would do almost anything to keep the -
relationship with brand X
Note. Loadings are standardized; all are significant at p < .01. The * identifies items that were removed during refinement
of the measurement model. In total, 11 items were dropped from further analyses, as they were either cross-loaded with
high modification indexes (MI) and/or have large standardized residuals (SR) (>2.58), (Byrne, 2001; Long, 1983).
The first construct, product quality, measured through seven items, was adapted
from van Riel et al. (2005) and Crosby et al. (2003). It captured the overall excel-
lence or superior quality of the product, innovation (van Riel et al., 2005) and
durability (Crosby et al., 2003). For service quality, eight items were adapted from
Jayawardhena et al. (2007) and van Riel et al. (2005). Examples included items that
expressed “information service” and “excellent personnel service.” For perceived

price, we generated five items to capture several aspects considered important
in the branding and business buyer context, such as comparative and competitor
pricing (Kukar-Kinney & Grewal, 2006), clear and good price information (Bolton,
Kannan, & Bramlett, 2000), and high pricing as an indicator of product quality
(Kukar-Kinney & Grewal, 2006; Lowengart, Mizrahi, & Yosef, 2003).
We operationalized the ethical branding construct in accordance with the corpo-
rate marketing approach, which defines it as a moral obligation delivered through
economic, social, and environmental responsibilities (Enderle & Tavis, 1998; Fan,
2005; Schwartz & Carroll, 2003; van de Ven, 2008). In total, the ethical branding
concept was represented by twelve items, capturing three dimensions: economic
responsibility, social responsibility, and environmental responsibility. The economic
responsibility dimension includes items addressing profit maximization and respect
for supplies/customers (Enderle & Tavis, 1998). For the attributes of social responsi-
bility, we measured perceptions of responsibility toward political and socio-cultural
systems (Enderle & Tavis, 1998). For the final dimension, environmental respon-
sibility, items refer to the company policy regarding natural resources, such as raw
materials and energy, or its recycling and disposal program for handling waste and
pollution outputs. We utilized items concerning environmental responsibility from
Enderle and Tavis (1998), and Nnorom and Osibanjo (2008).
Company reputation, as noted earlier, captures stakeholder feedback about the
legitimacy of the firm’s identity claims (Whetten & Mackey, 2002: 401) and the
association that the buyer has with the company (Brown & Dacin, 1997). The items
we used were derived from Cretu and Brodie (2007). Finally, brand loyalty was
measured with eight items from Morgan and Hunt (1994), van Riel et al. (2005),
and Davis (2003), and refers to loyalty and commitment in the business-to-business
context (Morgan & Hunt, 1994; Singh & Sirdeshmukh, 2000).
In the questionnaire, we asked the respondents to select one brand from a
given list of common brands of electronic office equipment (such as Canon,
Hewlett-Packard, etc.). If the brand was not listed, the respondent was given an
option to indicate the brand they currently used/owned in their office. Once a
brand was selected, respondents were then directed to respond to the remaining
statements in the questionnaire, indicating their agreement or disagreement based
on their chosen focal brand (referred to as “brand X” in the questionnaire and in
Table 1). All responses were given on 7-point Likert scales (from 1 = strongly
disagree to 7 = strongly agree).
Pre-Test and Pilot Study

For content validation purposes (before the main data collection was carried out),
we conducted a pre-test to examine the adopted items and study measures, which
was followed by a pilot study. We involved five experts and practitioners as the
participants in the pre-testing process to improve the content and face validity,
and, upon their satisfaction with the content and readability of the measures,
we proceeded to test the internal consistency of the measures by conducting a
pilot study. This pilot was conducted with industrial buyers of electronic office
equipment using an e-mail survey sent to the three main locations of electronic
office equipment factories and service offices (Kuala Lumpur, Selangor, and Negeri
Sembilan). Out of 300 questionnaires administered to a convenience sample of
industrial buyers, we received 50 useable questionnaires. The results of the pilot
study indicated that the six constructs have a high level of internal consistency
(Cronbach’s alpha > 0.70): product quality (0.86), service quality (0.87), perceived
price (0.78), ethical branding (0.88), company reputation (0.74), and brand loyalty
(0.85). These results appear to be consistent with previous studies, including van
Riel et al. (2005), and Cretu and Brodie (2007). We then proceeded with the main
data collection to which 272 industrial buyers responded.
RESULTS
Confirmatory Factor Analysis (CFA)

To analyze the data from the main study (272 responses), structural equation mod-
elling (SEM) was implemented via AMOS 20 and the default method—maximum
likelihood. A two-step approach to test the measurement model’s validity and reli-
ability (in step one CFA), and nomological validity (in step two the full structural
model), as proposed by Anderson and Gerbing (1988), was carried out on all of the
study’s constructs (product quality, service quality, perceived price, ethical branding,
company reputation, and brand loyalty).
Thus, all 44 items were subjected to CFA, the measurement model, where a refine-
ment process was conducted to establish the construct validity and reliability of all
the items generated. The initial results of the CFA measurement analysis (in step one)
showed a poor fit and had to be re-specified (Hair, Anderson, Tatham, & Black, 2008).
Statistics (χ2 [272] = 2112.89; p < .01; χ2/df = 2; GFI = 0.76; TLI = 0.85; CFI = 0.86;
and RMSEA = 0.06) indicated a marginal fit. Items that were cross-loaded with high
modification indexes (MI) and large standardized residuals (SR) (>2.58) were dropped
from further analysis (Byrne, 2001; Long, 1983). A total of 11 items were dropped
(see Table 1). The final measurement model incorporated 33 items, representing the
six constructs under study with an acceptable fit (χ2[272] = 524.06, p < .01; χ2/df =
1.68; GFI = 0.87 [marginal fit]; TLI = 0.92; CFI = 0.93; RMSEA = 0.05) (Hair et al.,
2008). The CFA provided evidence of convergent validity, with parameter estimates
all above 0.5 (Kline, 1998) and significant at p < .01 (Anderson & Gerbing, 1988).
Table 2 shows descriptive statistics, correlations, and reliability estimates. Levels
of Cronbach’s alpha, composite reliability are above recommended levels. Estimates
of average variance extracted (AVE) are above 0.5 (Fornell & Larcker, 1981), and the
square root of each AVE exceeds the bivariate correlation coefficients, which ranged
from 0.41 to 0.62 (see Table 2). There are no substantial cross-loadings between the
measured and error terms, with standardized residuals all < 2.58 (Garver & Mentzer,
1999). Thus, the measurement model has adequate discriminant validity.
Structural Model – Direct Effects

We tested direct effects via AMOS, with the full structural model showing good
fit (χ2[272] = 882.27, p < .01; χ2/df = 1.83; GFI = 0.86 [marginal fit]; TLI = 0.91;
Table 2: Descriptive Statistics, Correlations, and Reliability Estimates
Composite Average Variance

Mean S.D. 1 2 3 4 5 6 Reliability Extracted (AVE)
1. Product quality 5.25 0.77 .92 .91 0.55
2. Service quality 5.24 0.88 .45 .91 .88 0.60
3. Perceived price 5.44 0.69 .41 .51 .79 .75 0.50
4. Ethical brand 5.22 0.83 .52 .60 .47 .94 .92 0.55
5. Company reputation 5.34 0.85 .58 .41 .44 .57 .87 .82 0.52
6. Brand loyalty 5.27 0.89 .62 .60 .43 .61 57 .88 .85 0.60
Note. All correlations are significant at p < .01. Cronbach’s alpha coefficients are shown in italics along the diagonal.
CFI = 0.92; RMSEA = 0.05) (Hair et al., 2008). See Table 3 for the detailed
results of our tests of direct effects.
We found direct effects as hypothesized for all three predictors of ethical brand-
ing, supporting H1a, H1b, and H1c. These three predictors (product quality, service
quality, and perceived price) explain 42% of the variance in the ethical branding,
with service quality having the greatest effect. We found significant direct effects
of product quality and perceived price on company reputation, supporting H2a and
H2c. Lastly, we found direct effects of product quality and service quality on brand
loyalty, supporting H3a and H3b. We did not find support for two hypotheses, H2b
(service quality → company reputation) and H3c (perceived price → brand loyalty).
Mediation Results
To examine mediation effects (H4a, H4b, H4c, H5a, H5b, H5c, and H6), we used the
PROCESS macro, version 2.16 (Hayes, 2013; Preacher & Hayes, 2004; 2008).6 The
PROCESS method allows researchers to determine whether the mediator variable is
significant and important (Hayes, 2013; Preacher & Hayes, 2004), particularly
when using a small sample size (Shrout & Bolger, 2002). Specifically, we established
Table 3: Hypothesis Results and Summary for Direct Effects
` β SE CR p Hypothesis
H1a product quality → ethical brand 0.24 0.06 4.38 0.01 supported
H1b service quality → ethical brand 0.43 0.05 8.68 0.01 supported
H1c perceived price → ethical brand 0.15 0.06 2.53 0.01 supported
H2a product quality → company reputation 0.46 0.06 7.59 0.01 supported
H2b service quality → company reputation 0.01 0.06 0.19 0.85 rejected
H2c perceived price → company reputation 0.24 0.07 3.62 0.01 supported
H3a product quality → brand loyalty 0.48 0.05 8.49 0.01 supported
H3b service quality → brand loyalty 0.41 0.05 7.88 0.01 supported
H3c perceived price → brand loyalty 0.05 0.06 0.84 0.40 rejected
Note. β = Standardized regression weights; SE = Standard error; CR = Critical Ratio
mediation using guidelines proposed by Preacher and Hayes (2008), Preacher and
Kelley (2011), and Zhao, Lynch, and Chen (2010), as set out below:
(1) If the introduction of a mediator variable (M) into the X → Y relationship
(known as the c’ path) reduces the effect sizes (β) of the original direct
effect, it indicates mediation;
(2) A confidence interval (CI) that excludes zero indicates that mediation
has occurred (Preacher & Hayes, 2008);
(3) An X → Y direct effect with an nonsignificant result (p > .05) after M
is introduced (the c’ path), indicates full mediation, while a significant
result demonstrates a partial case (Baron & Kenny, 1986; Preacher &
Kelley, 2011; Zhao et al., 2010);
(4) In the event of a partial case, effect sizes are examined as they could
strengthen the justification for full or partial mediation (Preacher &
Kelley, 2011). Two effect sizes were chosen for the current study: the
completely standardized indirect effect (abcs) and percent mediation
(PM). Effect sizes must fulfill all three general criteria: (1) interpretable
scaling, (2) confidence interval available, and (3) independence of
sample size, as in the case of abcs.
Table 4 shows detailed results of our application of the PROCESS method.
The results of our analyses indicate support for stronger or full mediation with
respect to two hypotheses; namely H4b (service quality → ethical branding →
company reputation), and H5c (perceived price → ethical branding → brand
loyalty). Specifically, for H4b, for the a path, β = 0.57 (p < .01), and for the
b path β = 0.50 (p < .01), while the direct path of service quality → company
reputation after the [M, c’ path] was controlled was found to be nonsignificant.
This result indicates a case for full mediation (β = 0.11, p = 0.08, 95% CI [0.20,
0.39]). As for H5c, a similar result favoring a stronger mediation case is present.
Although the result as shown in Table 4 indicates both paths (direct and indirect)
are significant for H5c (a partial mediation case), both effect sizes, PM and abcs,
indicate that the mediator accounts for more than half of the total effect (the c path).
Specifically, PM = 0.61 (or 61%) and abcs = 0.30, (β = 0.23, p < .01, 95% CI [0.17, 0.31]);
thus supporting stronger mediation via ethical branding.
When both direct and indirect paths are significant, a further examination through
additional techniques provides justification for full or partial mediation (Preacher &
Kelley, 2011). H4b’s mediation effect accounts for almost three quarters of the total
effect (the c path) (PM = 73%) and abcs = 0.28, (β = .30, p < .01, 95% CI [0.22, 0.40]).
The abcs value indicates that Y (company reputation) decreases by 0.28 standard
deviations for every 1 standard deviation drop in X (service quality) indirectly via
ethical branding. A similar pattern exists for H5c; accordingly there is evidence of full
mediation for two hypotheses (H4b and H5c). Finally, for the remaining hypotheses
(H4a, H4c, H5a, H5b, and H6), Table 4 results indicate partial mediation since both
paths (direct and indirect) are significant and the mediator accounts for less than
half of the total effect (the c path) (PM ranged between 0.40 and 0.49).
412
Table 4: Hypothesis Results and Summary for Mediation Effects
Bootstrapping
indirect effects
β Indirect effect BCa 95% CI Effect Sizes Hypotheses test
Hypotheses a b c c’ Β SE LL UL PM β; abcs (95% CI LL, UL) result
H4a Product quality → Ethical 0.50** 0.39** 0.61** 0.41** 0.19** 0.05 0.12 0.30 0.32 β = 0.18; abcs = 0.19 Support for partial
Business Ethics Quarterly

brand → Company reputation (0.11, 0.27) mediation
H4b Service quality → Ethical 0.57** 0.50** 0.40** 0.11 0.29** 0.05 0.20 0.40 0.73 β = 0.30; abcs = 0.28 Support for full/
brand → Company reputation (0.21, 0.40) stronger mediation
H4c Perceived Price → Ethical 0.50** 0.47** 0.51** 0.28** 0.24** 0.04 0.16 0.32 0.46 β = 0.19; abcs = 0.24 Support for partial
brand → Company reputation (0.14, 0.27) mediation
H5a Product quality → Ethical 0.50** 0.45** 0.70** 0.47** 0.23** 0.05 0.15 0.34 0.33 β = 0.20; abcs = 0.23 Support for partial
brand → Brand loyalty (0.13,0.28) mediation
H5b Service quality → Ethical 0.58** 0.42** 0.60** 0.36** 0.24** 0.05 0.16 0.35 0.40 β = 0.24; abcs = 0.24 Support for partial
brand → Brand loyalty (0.16, 0.35) mediation
H5c Perceived Price → Ethical 0.50** 0.59** 0.49** 0.19* 0.30** 0.05 0.21 0.40 0.61 β = 0.23; abcs = 0.30 Support for full/
brand → Brand loyalty (0.17, 0.31) stronger mediation
H6 Ethical brand → Company 0.54** 0.46** 0.60** 0.35** 0.25** 0.05 0.17 0.34 0.41 β = 0.23; abcs = 0.25 Supported for partial
reputation → Brand loyalty (0.16,0.32) mediation
Note. β = Standardized regression weights for a, b, c and c’; where, path a - IV (X) to mediator (M), path b - M to DV (Y); path c is the total effect; path c’ is the direct effect X to Y after controlling
for M; SE = standard error; BCa = bias corrected and accelerated; 5000 bootstrap samples, CI = confidence interval, LL = lower limit, UL = upper limit (PROCESS macro, Preacher & Hayes,
2004; 2008). Further test on mediation is examined through effect sizes: PM = percent mediation; abcs = completely standardized indirect effect on X to Y) (Preacher & Kelly, 2011, see p. 97 and
p. 99, respectively, for formula and calculations). ** p < .01
DISCUSSION
Theoretical Implications
This study contributes to the literature in the following ways. First, we offer
insights into how CSR dimensions can be conceptualized and operationalized
from a corporate marketing and branding perspective. Second, we develop an
integrated consumer response model and offer empirical evidence of the impact
of ethical branding on other corporate brand equity variables and marketing
outcomes, including corporate reputation brand loyalty. In particular, the study
examined the role of ethical branding as a mediator. Finally, as the study focuses
on corporate branding, we propose a different stakeholder approach focusing on
the industrial buyer rather than on individual buyers, unlike past research. The
following section discusses these contributions in more detail.
First, while previous research differentiates and emphasizes a firm’s corporate
brand identity to its multiple stakeholders through functional values (e.g., product/
service quality, prices) and/or emotional values (corporate credibility or corporate
personality traits) separately, this study proposes a new way for a corporate brand
to project and differentiate itself via CSR elements through its products, services,
and perceived price. In particular, we define the ethical brand at a more abstract/
corporate level through a firm’s moral responsibility to its multiple stakeholders,
delivered through economic, social, and environmental factors. That is, an organi-
zation can express these moral obligations through values derived from functional/
tangible attributes (expressed through an ethical orientation of its products or
services), for example, a firm’s product program related to recycling, disposal
strategy, social quality (Brunk, 2010a), or its economic attributes, maximizing the
industrial buyer’s profit by producing an ethically oriented product (Powell, 2011).
Because previous research investigated the ethical brand individually, only a partial
effect of the corporate brand and marketing outcomes was understood in relation to
consumer response (Loe et al., 2000). However, it is more effective to combine
these values as they not only comprise the core values of the corporate brand (Urde,
2003), but also establish a more abstract association at the corporate level; hence,
the organization could leverage these values across products offered (Beverland
et al., 2007). Ethical branding is thus an important intangible firm asset that should
be embedded in the overall corporate marketing strategy (Olins, 2014).
Second, although there is already a stream of research proposing differentiation
through ethical dimensions (Balmer et al., 2011; Singh et al., 2012; Stanaland et al.,
2011), its focus is primarily on the product basis (Brunk, 2012); its antecedents and
consequences among consumers are still unclear due to a lack of empirical findings
(Brunk, 2010b; Hur et al., 2014). The current study offers an integrated conceptual
understanding, whereby ethical branding is proposed to be a mediator variable
in relation to its antecedents (product, service quality, and perceived price) and its
consequences (corporate reputation and brand loyalty). In particular, this study’s
originality lies in the exploration of the mediator role of an ethical brand and its
relationships (antecedents and consequences). We develop and empirically test the
relationships between the ethical brand concept, its antecedent effects (product
quality, service quality, and perceived price), and its outcome effects, which include
buyers’ reactions toward the company reputation and loyalty toward the brand.
Our study is important for academics and practitioners, who may appreciate the
ethical aspects of branding that are more significant in the buyers’ evaluations in
the business-to-business context. Likewise, through mediation analyses, the effect
of ethical branding perceptions on corporate brand is explained (Hur et al., 2014;
Singh et al., 2012). The study shows that corporate credibility (based on consumer
trust) enhances corporate reputation when ethical branding is a mediator.
In addition, we found that certain predictors are more important than others in
customers’ evaluations of the ethical brand. Past research has illustrated that product
quality, service quality (Cretu & Brodie, 2007), and perceived price are important
factors influencing customer value as an expression of the ethical aspect (Sagar,
Singh, & Agrawal, 2006; Story & Hess, 2010). In particular, products differentiated
on the basis of environmental and social qualities are seen as ethical (Balmer et al.,
2011; van de Ven, 2008). Between service quality and company reputation, however,
the result indicates no relationship. The absence of a finding here can be explained
in two ways. First, since the study context is industrial buyers of electronic office
equipment, product quality is emphasized over the services aspect. Industrial buyers
are concerned about the quality of the electronic product with regard not only to
its functional aspects but also to how it adds value, such as recycling or disposal
policy (Brunk, 2010a). Second, in the Malaysian context, suppliers must ensure that
the quality of the products meet the ethical requirement of being seen as ‘green’
(environmentally friendly), as this is a consideration criterion set not only by most of
their industrial buyers before making their purchase decision but also by benefits of
producing or going green, which allows firms to win awards and gain accreditation,
thus resulting in a better reputation.
Likewise, Sagar et al. (2006) explain that one of the important elements of brand
positioning in Asia (Indian context) is to emphasize ethical attributes (which includes
product social acceptability, consumer value, ethical issue in pricing, culture, and
the geographic relevancy of the product). Ultimately, this forms the brand identity of
the company. Because previous research focuses more on the Western context, such
as the US, empirical findings from other continents are limited (van de Ven, 2008).
Nevertheless, service quality has a positive and significant indirect effect on company
reputation via the ethical brand. This suggests that service quality can still enhance the
company reputation if the company provides an ethical brand, or the brand does not
result in any negative effect for its stakeholders as a whole. In other words, a positive
response or reaction to company reputation is achieved when the brand is considered
ethical through the quality of service offered by the company. This constitutes an ethical
foundation in marketing (Balmer et al., 2011; Olins, 2014; van de Ven, 2008) to help
the organization successfully communicate its intentions to society while maintaining
genuine societal engagement (van Rekom et al., 2014). The ethical brand represents the
value of trust by offering superior value with high integrity and concern for stakeholders.
We thus confirm theoretical frameworks extant in previous literature, in which product
quality and service quality are considered important aspects of a brand and seen as ethical
by industrial buyers (Cretu & Brodie, 2007; Fan, 2005; Paluszek, 2005).
Our final contribution concerns the stakeholder approach. Because previous

research has focused on functional and emotional values on a more individual
basis, the intangible attributes – the effects of ethical branding on marketing
outcomes – are not realized among other stakeholders, such as industrial buyers
or suppliers (Brunk, 2010a; Chi-Shiun et al., 2010; Hur et al., 2014). By provid-
ing empirical findings regarding a different stakeholder group (industrial buyers
in electronic office equipment), this study adds to current literature concerning
how this group of customers behaves in their purchase decision making. While
at the individual level the ethical brand (emotional values) is concerned with the
issues related to fair pricing, public responsibility, leadership, and brand success
(Page & Fearn, 2005), at the industrial buyer level stakeholders may be willing to
pay a higher price due to the ethical orientation of a brand (product or services)
(Balmer et al., 2011; van de Ven, 2008). Further, industrial buyers are also keen
to associate themselves with ethically oriented brands and suppliers because this
will add credibility to their reputation among their own stakeholders (Mulki &
Jaramillo, 2011). Hence, responsibility is a key concept, formulated by a moral
statement that can manage risk and uncertainty (Stahl, 2005).
In a similar vein, we found an interesting result with regard to perceived price and
the mediator variables: ethical branding and company reputation. That is, perceived
price is found to fully mediate ethical branding and partially mediate company
reputation to explain industrial buyers’ brand loyalty. Industrial buyers are willing
to pay more because they perceive that companies that are selling electronic office
equipment fulfill their economic, environmental, and social responsibilities. Earlier,
we argued that with certain types of industry, companies must behave responsibly
toward the environment; however, this act incurs greater costs, and increased prices
are therefore regarded as acceptable (Story & Hess, 2010). Industrial buyers in this
context thus are somewhat ethically conscious. Zabid and Alsagoff (1993) found that
Malaysian managers have high perceived ethical values in several sectors, including
industrial manufacturing. Industrial buyers are willing to pay the higher price but
only if the activity of the company considers the responsibility to its stakeholders
as an expression of the ethical brand. Consequently, organizations will prosper by
delivering products and services that benefit society (Maas & Liket, 2011). Story and
Hess (2010) explain that when customers are committed (through an ethical brand),
they become insensitive to price asymmetries, paying more without regard to the
objective quality differences.
In summary, the current research’s originality lies within the conceptual and
operational aspects of the ethical brand from a corporate marketing and branding
perspective, providing an empirical understanding of how the concept works
(mediator role) and its relationships (antecedents and consequences) in the
context of industrial buyers in an emerging market in Southeast Asia, namely
Malaysia. Product quality, service quality, and perceived price are all important
criteria for a brand to be perceived as ethical (Brunk, 2012). We demonstrate that
a good brand contains an ethical standard and that brand value must be assessed
in both financial and ethical terms. Thus, brands must satisfy stakeholders as a
whole.
Managerial Implications
This study has several managerial implications. Because ethical consumerism is
evidently rising (Parguel et al., 2011), managers could spend their marketing budget
on activities that will portray them as being ethical, especially when addressing
multiple stakeholders. Management decisions should be based not only on a single
type of customer or shareholder but also on stakeholders, such as the business buyers
or suppliers (Chi-Shiun et al., 2010; Palazzo & Basu, 2007; Stanaland et al., 2011).
Overemphasis on ethical activities in an organization’s marketing communica-
tion might be misconstrued by the stakeholders, however, and the stakeholders’
perception of the sincerity of the company will be diminished (van de Ven, 2008).
From the current study’s findings, buyers are willing to pay a higher price in this
industry and trust their brands due to their overall perception and evaluation: that
the company has done the right thing and behaves responsibly (an ethical brand).
Therefore, communicating and engaging with society is vital and should begin in
the early stages of corporate strategy planning. With consistent implementation, the
brand will develop an authentic communication element and increase the level of its
sincerity (van Rekom et al., 2014). Such sincerity could then enhance the compa-
ny’s image and reputation among the stakeholders (Bowen, 2004), and, potentially,
may resolve any problems, particularly when companies must address innumerable
stakeholders across different countries. Managers must therefore consider the ethical
brand cost when producing the products as well as in communicating it to constitu-
ents. Likewise, suppliers must consider financial burdens that inevitably are involved
with compliance with market conditions; however, ultimately, such compliance will
ensure committed customers, long-term profitability, and the management of the
supplier-buyer relationship (Story & Hess, 2010: 247).
Although, at present, there is no guarantee that consumers will buy a product,
even if a company spends time and money on ethical activities (Olins, 2004), both
the public and pressure groups are watching these companies, and will reward them
positively if they behave in an acceptable manner (Olins, 2014). Nevertheless, most
scholars agree that incorporating ethical marketing (Balmer et al., 2011) or being
seen as an ethical brand (Fan, 2005) helps long-term business performance, e.g., by
enhancing company reputation; increasing sales, profit, and market share (Maas &
Liket, 2011; van Rekom et al., 2014); and, hopefully, improving the company’s
strategic competitive advantage.
Based on the findings of this study, we conclude that ethical business practices,
i.e., ethical branding, may be applied by companies to gain a competitive advantage.
Gaining increased brand loyalty through an ethical brand is important for business
survival and growth. Encouraging ethical decision making is essential in socially
responsible branding programs if a firm is to achieve a good image and facilitate
“self-reinforcing, positive outcomes” (Caza, Barker, & Cameron, 2004: 175) that
can help to protect them from their competition.
Limitations and Future Research
Ethical branding is an under-researched concept. The current definition is based
on limited conceptual studies (e.g., Balmer et al., 2011; de Chernatony, 2002; Fan, 2005;
Maignan et al., 2005; Powell, 2011; Urde, 2003; van de Ven, 2008), addressing
the moral, economic, social, and environmental dimensions of ethical branding
(Schwartz & Carroll, 2003). However, recognizing that there may well be other
dimensions (such as sales/financial impact), work is required to further develop and
validate the concept, consider other dimensions, and explore it in other contexts to
increase the generalizability and applicability of the framework. Although the
current study sheds light on the value of having an ethical brand, more research
is needed to further develop the ethical brand concept to enhance a company’s repu-
tation as well as create loyalty among the company’s buyers. Also, it is important
to acknowledge that the present empirical findings should be interpreted within the
context under study. Finally, future research could investigate antecedents and ethical
branding dimensions separately to address corporate brand positioning more clearly
in different contexts/settings and across different stakeholders.
NOTES
1. We note that this is just one way to define an ethical brand. As highlighted by both Okoye (2009)
and Votaw (1972), CSR can mean many different things (not necessarily limited to economic, social, and
environment responsibility), but the general understanding is that it is about “being responsible for” or “a
social responsible behavior in the ethical sense” (Votaw, 1972: 25). In line with this view, the current article
uses this approach to determine how we perceive the ethical brand of a firm.
2. The CCM is at http://www.ssm.com.my (accessed 29 March 2014). The MIDA is at http://www.
mida.gov.my/env3/ (accessed 15 January 2014).
3. More details on the population of companies are available on request from the authors.
4. For example, van Riel et al. (2005) achieved a response rate of 8.8%, while Wilde, Kelly, and Scott
(2004) reported a response rate of 18.2%.
5. In May 2017, 1 Malaysian Ringgit = 0.23 USD.
6. The PROCESS macro is available at http://processmacro.org.
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The Importance of Ethics in Branding:

Mediating Effects of Ethical Branding on

Sulaiman Muhammad Ali

KEY WORDS: ethical branding, ethical corporate marketing, corporate brand,

LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT

Corporate marketing is a customer, stakeholder, societal and CSR focused philosophy

In particular, these moral obligations include such attributes as “honesty, integrity,

Theoretical Underpinning: Antecedents and Consequences of Ethical Branding

Direct Effects Hypothesis

value-added capabilities (Paluszek, 2005). The quality of a product includes

good quality product/brand with high-engineering design that offers superior

is acceptable to the public (van de Ven, 2008). Therefore, managing reputation is

Research Context, Sampling and Data Collection

Figure 1: Proposed Conceptual Model

Measures and Instrument Development

Table 1: Constructs, Items, and Confirmatory Factor Analysis Loadings

Construct/Source/Dimensions Item Loading

Construct/Source/Dimensions Item Loading

expressed “information service” and “excellent personnel service.” For perceived

Pre-Test and Pilot Study

Confirmatory Factor Analysis (CFA)

Structural Model – Direct Effects

Table 2: Descriptive Statistics, Correlations, and Reliability Estimates

Composite Average Variance

Table 3: Hypothesis Results and Summary for Direct Effects

Note. β = Standardized regression weights; SE = Standard error; CR = Critical Ratio

Business Ethics Quarterly

Our final contribution concerns the stakeholder approach. Because previous

Hayes, A. F. 2013. Introduction to mediation, moderation, and conditional process

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